Transcript Slide 1

GLOBAL
BUSINESS
DICTIONARY
AGENCY
PRINCIPLE
VIOLATION
• Serving self (or
corporation) instead of
stakeholders (community)
• Exploiting agents in
business use established
success systems (created
by government) for self
(rather than constituent or
community) gain.
•Corporate
deregulation
•Economic & social
outsourcing
•Lapdog boards &
regulatory agencies
•Short-term earn &
burn tactics
•Major political
campaign
contributions &
lobbying
•Neo-colonialism
BLACK HOLE
OF CAPITALISM
& GLOBAL
BUSINESS
(Impersonal) capitalism is
sustained by social,
economic, technological, &
political forces too
powerful for corporations
& nations to escape or
resist. Capitalism runs the
ST
21 century world both
economically & politically.
• Global off-shoring
• Global suply chains
• Free trade agreements
• International Standards
organization
• Digital technology & “hot
money”
• Global government
organizations
BODY &
BRAIN
NATIONS
The global economy is
divided into 2 basic
categories of nations:
Intellectual property
creators (brains) &
makers (bodies) of
global products &
services.
•Brain strategy =
offshoring
•Body strategy =
using net exporting
to turn brains into
global debtors
BONDED
WAREHOUSES
Trade
stimulus for
bordering
nations
Government helps both
cross-border buyer &
seller of goods to
generate revenue before
they have to pay for
their business trade
expenses.
“BRIC”
Brazil
Russia
India
China
Emerging middle
class nonWestern markets
using mixed
capitalism
BULL & BEAR
ECOLOGICAL
NATIONS
Natural
resource
surplus vs.
deficit nations
Global footprints
Natural resource
dependency profiles
predict future national
& regional economic
prosperity, stability, &
geo-political dominance
Bulls will soon have to
develop the capacity
to engage in future
natural resource
rationing & overcome
its negative pull on
economic growth.
Developing a
global pricing
system for
resourcereplacement &
renewal
CAPITAL
ACCOUNT
The amount foreign
nations invest in
your nation minus
how much your
nation invests in
foreign nations
The most common ways
nations invest in one
another:
• Job creation via offshoring
• Supply chains
• Technology-sharing
•Corporate joint
ventures
•Maintaining
currency values
•Legal & illegal
immigrant labor
The USA
owns/influences
more of the world
than anyone else
due to capital
account surplus.
CAPITALISM
BENEFITS
•Material standard of
living
•Decentralization of
economic efficiency
•Jobs, technology,
financing (psych
wants)
CAPITALISM
EXPLOITATION
CYCLES
• Non-sustainable
income (“sweat
shops”)
• Currency superiority
• Social off-shoring
• Economic, political &
cultural imperialism
To escape the
exploitation cycle,
developing
nations must
move up the value
added chain.
CAPITALISM
GLOBAL
INSECURITIES
Social Darwinism capitalism
survival of the fittest
• Economies
• Industries & markets
• Technologies
• Corporations
• Jobs & careers
• Communities & families (via
dual career-marriages)
• Free trade &
protectionism
• Trade disputes
• Business deregulation
• Corporate empirebuilding
• Unemployment &
business cycles
• Job off-shoring
• “Creative job
destruction”
• Business ethics violations
• Social outsourcing
• Culture conversion
• Global footprints
CAPITALISM,
MANAGING
BUT NOT
CONTROLLING
• Business laws &
regulations
• National protectionism
• Global government
organizations
• Social Darwinism
CAPITALISM
RUNS THE
WORLD
Lack of economic
self-sufficiency
makes capitalistic
trade mandatory
for all nations.
Impersonal
autonomous markets
run themselves via
the “invisible hand of
capitalism”
(institutionalized
self-interest).
Impersonal
markets control
economic assets:
jobs, pay, prices,
currencies, &
national budgets.
CHINA’S
COMPETITIVE
CHALLENGES
• Heavy dependence on low
value-added products,
Western technology &
outsourcing
• Lack of middle class
consumers & concentrated
market zones
• Corrupt business practices
• Inadequate number of
industrial jobs for rural
Chinese & Chinese-owned
corporations
• Many sweat shop
operations
• Lack of business
regulation
CHINA
SPLITS
•Agricultural vs.
manufacturing
workers
•Rural vs. urban
Low vs.
medium-profit
products on
the value
added chain
CHINA’S WEAK
INSTITUTIONS
Feudal
power
structure
China’s “frontier”
economy lacks
institutional
control &
professionalism
Weak human
rights = weak
capitalism
CHINESE
EMERGING
EMPIRE IN THE
DEVELOPING
WORLD
Angola, Brazil, Iraq,
Pakistan, North
Korea, Albania,
Cambodia,
relationships
established with most
African nations
CHINESE
ECONOMIC
STRATEGY
Develop China’s
economy via
foreign money
& technology
1.Keep the West
on the debt &
off-shoring
spider web
2.Net-exporting
3. Export-stimulus
low currency policy
4. Non-meddling
foreign policy with
developing world
economic partners
COMMUNITY
CAPITALISM
Workers (vs. corporations in
industrialized nations) as
capitalists in agrarian
nations use a less
profitable, higher cost
distribution system in order
to provide a sustainable
income for extended
community stakeholders.
CORPORATE
SURFING
(flex/speed)
The 21st century competitive
need to:
• Rationalize global
operations
• Exploit new technology
• Invent & innovate
• Project management via
multi-national virtual teams
• Domestic outsourcing &
foreign off-shoring
• Virtual organizations &
assets (a la EBAY)
• Flex employees:
outsourced; part-time;
temp; renewable contracts
for finite hours of work
CORRUPT
FOREIGN
PRACTICES ACT
1977 U.S. law that makes it legal
for corporations to pay bribes
for “facilitating” business
services in non-institutional
nations (as long as the bribes
are reported on the company’s
tax statement.) Bribes to
government officials are illegal
(but can easily be made via
independent “consultants.”)
CREATIVE JOB
DESTRUCTION
The jobs lost by nations
involved in off-shoring
& free trade agreements
are gradually replaced
by new jobs both higher
& lower on the value
added chain.
• Most manufacturing jobs
lost by the USA are
replaced by lower-paying
service sector jobs.
• Some manual labor jobs
are replaced by a fewer
number of computer jobs.
•Some full-time jobs
are replaced by parttime jobs.
•Some jobs with
benefits are replaced
by jobs with fewer or
no benefits.
CULTURE
CONVERSION
Capitalism thrives best in
individualism cultures
where community
(multiple stakeholders)
is minimized to enable
people to live their lives
around the needs of
organizations > family.
Traditional, community,
family-focused cultures
(home to ¾ of
humanity) are
evaporating as
capitalism spreads into
the developing world.
Capitalism molds culture.
CURRENCY
MANAGEMENT
Governments manipulate
(“dirty float”) & maintain
currency values by
buying & selling large
enough volumes in global
financial markets to
maintain their nation’s
currency policy.
Maintaining a
nation’s currency
trading range
requires cooperation
with key trading
partners.
By trading, a nation
brings in foreign
currency reserves
needed for “dirty
float” domestic
currency
management.
•“Propped up” (overvalued) currencies
favor importers
(consumers).
•Undervalued
currencies favor
exporters (business).
National currency policy:
• Economic stimulus based
on consumption
(consumers)
• Eco stimulus based on
productivity (corporations),
limited in the West by offshoring manufacturing.
CURRENCY
VALUE
Global
perception of
the nation’s
economic &
political stability
•
•
Global trade affects
currency supply
Trade surplus nations
generally have higher
currency values (due to a
lower supply of their
currency in the world
economy). Vice versa for
nations with trade deficits.
CURRENT
ACCOUNT
A nation’s annual
exports –
imports = trade
balance
The annual USA
negative current
account (trade deficit)
empowers foreign
creditors to influence
American foreign
policy.
DEVELOPING
WORLD
¾ of all people live in:
•Africa
•India
•China
•Middle East
Agriculture-based
economies with
exports low on
the value added
chain
Social, political, &
economic problems
stemming from
historical exploitation
by Western colonialism,
religion, racism,
disease, & overpopulation
Historically bypassed
by capitalism
because of low
profit potential &
poor business
infrastructure
DEVELOPING
WORLD
BUSINESS
CHALLENGES
Inadequate business
infrastructure:
Roads, electricity,
sanitation, business
professionals, banks,
reliable suppliers,
technology, political
stability, etc.
• Weak, corrupt
institutions
• Untrained manual labor
• Civil wars & ethnic
cleansing
• Scarce middle class
DOHA
(Qatar)
ROUND OF
WTO TALKS
The World Trade Organization
achieved no progress in its
Doha 2000-2006 round of
discussions over Western
nations dropping agricultural
subsidies (a violation of WTO
free trade regulations) to
increase food importing from
the developing world.
The Global Agreement on
Tariffs & Trade (GATT)
started the World Trade
Organization because of
irreconcilable trade
agendas (West vs. rest of
world). Failure of the Doha
WTO round was “déjà vu all
over again.”
ECONOMIC
INTERDEPENDENCY
• The interconnected
global economy has made
nations more
economically dependent
on one another & more
susceptible to global
economic trends.
• Virtual nations
• “Brain” & body” nations
• Global supply chains
• Manufacturing offshoring
• Free trade agreements
• Technology uniformity
• Debtor & creditor nations
ECONOMIC
NATIONALISM
Protecting domestic
corporations
•Tariffs
•World Trade
Organization suits
•Tariff tax offsets
•Free trade
agreements
•Neo-colonialism via
global government
organizations
•Corporate subsidies
ECO POWER
st
IN THE 21
CENTURY
st
21
•In the
century, economic
power trumps
military power
•Japan & Germany
• Trade surpluses:
production/exporting >
consuming/importing
• Balanced government
budgets or surpluses
• Trade surpluses
EMERGING
MARKETS
“BRIC” &
Latin America
Emerging middle
class (disposable
income)
consumers in
large population
zones
To grow economically,
nations must move
up the value added
chain & become more
middle class & less of
an oligarchy.
The final
capitalist
bonanza?
ETHICS,
NEO-LIBERAL
CAPITALISM
Business community =
All stakeholders
directly impacted by a
corporation:
customers, employees,
suppliers, local
communities, etc.
Companies dedicated to
community would strive to
maximize community benefits
& minimize negative
community impacts. This is
inconsistent with neo-liberal
Western capitalism, which
views corporate stockholders
as the sole group corporations
are responsible for.
Because community & neoliberal capitalism are
incompatible, business ethics
is legalistic (a matter of
legislation & suits) rather
than values-based
(“morality”). Corporations in
neo-liberal cultures are not
responsible for social
community.
In individualism cultures,
corporations have only two
ethical duties: to maximize
stockholder financial returns
& to obey the letter of
relevant business legislation
(as actively influenced by
business lobbying & PAC
contributions).
MAIN RECENT CAUSES OF COMMUNITYDAMAGING BUSINESS BEHAVIORS
• Decline of agency
principle & rise of
professional
exploitation
• Business deregulation
• Lapdog boards
•Business financing
of politics
•Libertarian
ideology:
individualism >
community
EUROPEAN
UNION
27 members: Austria, Belgium,
Bulgaria, Cyprus, the Czech
Republic, Denmark, Estonia,
Finland, France, Germany, Greece,
Hungary, Ireland, Italy, Latvia,
Lithuania, Luxembourg, Malta, the
Netherlands, Poland, Portugal,
Romania, Slovakia, Slovenia,
Spain, Sweden, and the United
Kingdom. 17 other regional
nations are not currently members.
ANGLO-SAXONS: Ireland &
Britain
CONTINENTALS: France,
Germany, Belgium, Austria,
Luxembourg
MEDITERRANEANS: Greece,
Spain, Italy, Portugal, Cyprus
NORDICS: Demark, Sweden,
Finland, Netherlands
EU
CHALLENGED
• Citizen apathy & malaise
about the EU “dream”
• Standard of living
inequalities
• Persistent
unemployment,
government deficits, &
economic stagnation
• High number of retirees
supported by workers
& crumbling welfare
state
• Rigid worker welfare
laws & short workweek
• No constitution
EU
CONSTITUTION
• Federalism vs.
nationalism
• Conflicting EU
pluralities &
divisiveness
• Referendum rejections
& surrogate treaties
•Growing right wing
racist fascism
in Europe
•Voting for politicians
of different
nationalities?
EUROZONE
• The 16 of 27 EU members
that have adopted (1999)
the Euro as their official
national currency
The “PIIGS”, EU govt.
deficit nations: Portugal,
Ireland, Italy, Greece,
Spain
•PIIGS governments are in
financial jeopardy due to
high social welfare (votebuying) deficits & the high
value of the Euro. Their
rotten economies endanger
the value of the Euro & the
existence of the EU.
•PIIGS economies are too
poor to afford the Euro on
their own (like living in New
York or Tokyo on a Waco
income).
•Northern EU nations
subsidize their use of the
Euro & hence PIIGS social
welfare benefits.
• Should/can the EU cancel
PIIGS membership to halt
subsidies & their economic
baggage?
• Is use of the Euro as the
EU’s official currency
unrealistic, & hence the EU
itself?
EXTERNALITIES
Externalities = the positive &
negative impacts of corporate
profit-maximization on nonstakeholders.
Positive externalities:
• Job creation
• Tax revenue
• Productive use of technology
Negative externalities:
• Pollution
• Social outsourcing
• Unemployment
• “Sweat shop” operations
• Political bribery (legal &
illegal) & lobbying
FAILED STATES
• Nations which lack a
legitimate or functional
government; fail to
provide basic public
services; & often are
regional political “pariahs”
who can’t coexist with
neighboring nations
Somalia, Chad, Sudan,
Zimbabwe, Afghanistan,
Iraq, Pakistan, Haiti, Ivory
Coast, North Korea, Yemen,
Bangladesh, Congo,
Guinea, Burma, Nigeria,
Timor-Leste
“Failed states” (most in
Africa & the Middle East)
pose large humanitarian &
Western foreign policy
th
th
problems (from 19 & 20
century colonialism &
th
st
involvement in 20 & 21
century regional civil wars).
“FAIR”
TRADE
The “fair” trade (vs. “free”
trade) system of extended
capitalist stakeholders (vs.
stockholders): workers +
their families + the local
community + members of
an alternate value-added
chain
Worker & community
capitalism for
sustainable incomes
Alternate “FAT” value
added chain &
distribution system to
enable price “premiums”
for sustainable incomes
FOREIGN
DIRECT
INVESTMENT
Global
economy’s
$3T daily blood
circulation
Facilitating global
capitalism:
• Importing-exporting
• Off-shoring operations
• Stock & currency
exchange markets
• Technology transfer
FREE
TRADE
•Maximum corporate
access to global
markets via
permeable national
borders
•Economic Social
Darwinism
•No
protectionism
•Free trade
agreements
•Western ideological
hypocrisy
FREE TRADE
AGREEMENTS
• North American Free Trade Agreement
(NAFTA)
• European Union (EU)
• ASEAN (Association of Southeast Asian
Nations) APEC (American-Pacific Trade)
Cooperative)
• MERCOSUR (Southern Common Market)
• CAFTA (Central American Free Trade
Agreement
• FTAA (Free Trade Agreement of the
Americas)?
The FTA gamble:
• Larger slice of the pie vs.
a larger pie
• Critical mass foreign
direct investment +
physical infrastructure &
entrepreneurial risktaking
• Creative job destruction =
Mexico’s NAFTA gamble
• Global triangle of free
trade? Western single
stakeholder capitalism is
the most competitive form
capitalism global
culture conversion
FREE
TRADE
ZONE
Designated geographical
areas in developing
nations where foreign
companies can use
cheap labor to make
tariff-free products to
sell in the nation
FRONTIER
ECONOMIES
•Business operations
with no regulation,
corruption, or
institutional
support
•“BRIC” nations
•Business corruption
•Booms & busts
•Corporate
externalities
•Oligarchs
•Employee abuse
GLOBAL
BUSINESS
DRAMA
• Interdependency of
economies & the
emerging one world
economy
• Drastic global wealth
disparities
• Economic nationalism
•Economic stagnation
of the West &
economic emergence
of the developing
world
•Dominance of transnational corporations
Neo-liberal
(Western)
capitalism &
culture
conversion
GLOBAL
FOOTPRINTS
•Green & red
bulls & bears
•Natural resource
debtors &
creditors
Global
footprints of
consumerism
GLOBAL
GOVERNMENT
ORGANIZATIONS
(GGOs)
Organizations
with politicsbased authority
over national
governments
Political Influence:
•United Nations
•International
Criminal Court
Economic Influence:
• World Trade Organization
(WTO)
• International Monetary
Fund & World Bank
• European Union
• NAFTA
Ideological conflicts over
forms of capitalism
(individualism vs.
community), Keynesian
economics (debt-stimulated
national economic growth),
& neo-colonialism (Western
domination via economic
GGOs)
GLOBALISM,
CAUSES
•Capitalism
•Trade
•Universal platform
technology
•Transnational
corporations
•Free trade
•Global government
organizations
•Maximizing ROI
investors & priceminimizing consumers
GLOBAL
SUPPLY
CHAINS
• A global supply chain
consists of all the
contributors to a global
product, including raw
material suppliers,
manufacturers,
financers, transporters,
retailers, marketers, etc.
• Major global companies,
such as Dell Computer,
“big box” retailers, & the
U.S. military have “long”
geographically
extended) supply chains
across continents.
The lever of global
economic
interdependency,
trade, outsourcing,
& control of industry
value added chains
GLOBAL
WARMING
STRATEGY
CAUSES OF GW:
1. Oil-based global fuel system
2. Permanently underpricing oil
3. Lack of global environmental
protection institutions
4. Nationalism, especially
among largest oil consuming
nations
5. Short-term economic growth
politics > environmental
health
6. Consumerism-materialism
cultures
7. Individualism > community
cultures
8. Lack of convenient, efficient
mass transit
9. Dangers of nuclear power
GW strategy options:
1. Taming libertarian
consumerism (maximum
materialism at minimum cost)
as the primary engine of global
economic growth
2. Natural resource replacement
& renewal global pricing
system (paying the true cost
of resource exploitation)
3. Pollution offset global trading
markets
4. Need for a new global
government organization to
spearhead global warming
recovery & coordinate
disaster relief
5. Chinese economic
development: the GW
doomsday scenario
GODZILLAS
TIGERS
ZEBRAS
Godzillas
• Largest global economies
• Service sector economies
• Consumption > production
• Intellectual property
• “Brain” nations
Tigers
• Recently emerging
middle class body
nations: Hong Kong,
Taiwan, South Korea,
Singapore, Mexico, Brazil
• Mixed capitalism
Emerging Tigers
•China
•India
•Russia
•Indonesia
•Poland
Zebras
•Least developed +
failed states &
regions
•Africa, Middle East,
rural China
HOT MONEY
ECONOMIC
MELTDOWNS
• Currency/economic
meltdowns occurred twice in
the 1990s: Mexico & several
Asian nations
• Meltdown trigger #1: Shortterm foreign direct
investments treated as longterm capital by developing
nations & loaned out to
business
Meltdown trigger #2: Highexpectations global investors
panic at some unforeseen
political or economic shock
in an under-developed
nation or region & suddenly
pull out their FDI (now tied
up in non-liquid business
loans).
Meltdown trigger #3: Investor
panic sets off a sudden currency
depreciation:
1. Investors suddenly pull their
capital out of the economy,
foregoing interest earnings.
2. The nation’s government pays
investors back in local currency,
causing its global supply to
shoot up & its demand (price) to
fall
3. The weakened currency greatly
increases the cost of imported
goods, (especially hurting
domestic corporations) &
decreases revenue received for
exported goods
4. Investors further panic about
future prospects for the
nation’s economy, prolonging
the currency run
5. The government
faces bankruptcy &
must borrow large
sums of money
from the IMF &
other nations =
neo-colonialism
ILLEGAL
IMMIGRATION
ECONOMICS
• Illegal cross-border business
that companies , consumers, &
citizens on both sides of the
border use for economic gain.
• Because rich nations are so
dependent on illegal
immigration, they tolerate
shadow (underground)
economies.
The main causes of
illegal immigration:
• Inadequate profit
incentives for
capitalism
• Lack of national
economic development
• Weak or corrupt
institutions
• Significant standard of
living differences
between nations
• Free trade creative job
destruction
IMPERSONAL
AMORAL
MARKETS
Global markets for goods &
services result from
innumerable “grassroots”
decisions (the “invisible
hand” of capitalism)
relating to profit-seeking
by private interests +
impersonal supply &
demand factors.
Consumers have little
knowledge of how prices
are derived & how revenue
is divided along the value
added chain. Worker pay is
determined by impersonal
competitive factors, various
government regulations, &
foreign wages.
Virtually all capitalistic
marketplace behaviors are
based on surviving &
thriving (self-serving
behaviors) in the
competitive marketplace.
The “amorality” of capitalism
is to use the market system
for private gain.
Impersonal systems are
also the nexus of career
development (college
degrees + job-hopping)
& consumerism (credit
cards, malls, & online
shopping)
IMPORT
SUBSTITUTION
• Importing what is less
expensive than producing it
at home
• International Monetary
Fund’s neo-liberal
capitalism (individualism
culture single-stakeholder
corporations)
Developing nations
complain this eliminates
their food self-sufficiency
& raises global food prices
due to climate change;
periodic crop disasters; &
st
persistent 21 century
civil wars.
INDIVIDUALISM
CULTURE
In individualism cultures,
most people live their
lives around the needs
of organizations which
employ them. Family &
community are
subordinate to careers.
Key characteristics of
individualism culture:
• Personal achievement
(careers) as the basis for
personal identity & status
• Producing > nurturing roles
for women (unisex culture)
• Rule by impersonal
institutions
INTELLECTUAL
PROPERTY
•Copyrights
•Patents
•Pop culture
•Software
•Franchises
•The bread & butter
economic asset &
export of the
developed world
•Low cost, high profit
products
Primary trade
agenda of the
developed
world
INTERMEDIATE
PRODUCTS
Products such as computer
hardware, mechanical parts, and
textiles sold to manufacturers
(mainly in the developing world)
who produce the final product
sold to consumers. Such supply
products are on the middle
section of the value added chain
& thus generate less profit than
the completed product.
INTERNATIONAL
MONETARY
FUND (IMF) &
WORLD BANK
• Bank to nations
• Headquartered in
Washington D.C.
• IMF loans to the
developed world
• WB loans to the
developing world
Rich nations make deposits
to be loaned out for
ideological reasons: support
of neo-liberal capitalism →
cutting mixed capitalism;
privatizing government-run
companies; no trade
barriers; import substitution
The World Bank has to
experiment with many
of its large developing
world infrastructure
loan projects (dams,
roads, power plants,
etc.) & learn the hard
way from experience:
• Geographical
displacement of people
• Altering the social role
of women
• Unemployment
• Shift towards
individualism culture
INTERNATIONAL
STANDARDS
ORGANIZATION
(ISO)
Sculpting uniformity in
all operational
aspects of global
business:
manufacturing,
distribution, safety,
shipping, etc.
Corporations must be
ISO certified in their
areas of operation in
order to engage in
domestic or global
business.
INVENTION &
INNOVATION
•Invention = a new
core technology
(portable computer)
•Innovation = new
applications of the
core technology
(PDAs)
The “twin I’s” +
marketing push
companies & nations
to the most
profitable end of the
value added chain
The competitive
edge of Western
business dominance
& magnet of future
economic
opportunities
JOKER
CARD OF
ASIA
China’s magnetic booming
economy pulls in foreign
direct investment flows
from Asia & the West,
giving rise to many
economic & political
surprises (like the Joker
card in a game of cards):
•Off-shoring
manufacturing nexus
of the global economy
• Siphoning foreign direct
investment & jobs away
from other developing
nations to China
•Under-valued
Chinese currency to
stimulate exporting
•Chinese economic
neo-colonialism
around the world
KEYNESIAN
ECONOMICS
Economic policy advocated
by British economist John
Maynard Keynes after the
“Great Depression” of the
1930s to stimulate
national economies via
government spending &
deficits (mixed capitalism)
Most common arenas of
government spending to
maximize economic stimulus:
• Social welfare benefits
• Military equipping & war
• Agricultural & corporate
subsidies
• Infrastructure building
projects
Keynesian economic policy has
three major drawbacks:
• Escalating national debt, a
threat to the standard of living
of future generations
• Compromising national
sovereignty via dependence on
foreign deficit-financing
• Chief re-election strategy for
incumbent politicians
MERCANTILISM
• Using the economic assets of
other nations for your
nation’s economic growth &
stimulus
• Win-lose exploitative
th
mercantilism (20 century &
before)
• Win-win interdependency
st
mercantilism (21 century)
• Japan’s post-WW2 mixed
capitalism &
interdependency win-win
mercantilism
• Japan & China, the West’s
“drug pushers”: low-cost,
high-quality manufacturing
+ Western government debt
financing
Middle income countries
with limited disposable
income that have recently
reached middle class
status: China, Philippines,
Brazil, Mexico, Argentina,
Venezuela, Indonesia, etc.
MIDDLE
CLASS
Capitalism survives
& thrives on
people with
disposable
incomes
Middle class, not
upper class,
people are the
core of business
success & profit.
The largest middle
class nations (USA,
Western Europe,
Japan) are the mecca
of profitable global
consumerism– the
oxygen of business.
Middle class consumers are
emerging for the first time
in the developing world,
beckoning a future
bonanza for mass
merchandising companies
capable of dominating
global competition.
MIXED
CAPITALISM
• Government ownership
of businesses
• Subsidies: agricultural,
R&D, industry bail-outs,
low interest rates, tax
write-offs
• Tariff protection
Western federal
debt for economic
stimulus
(Keynesian
economics)
Mixed capitalism is the key
to Asian economic
nationalism:
• National industrial
planning
• Cartel industries
• “Sweetheart loans”
• Global market placement
MOST
FAVORED
NATION
STATUS
The strongest incentive
nations have for joining the
World Trade Organization,
“MFN” status guarantees
that member nations will
always pay the lowest
tariffs charged by other
WTO members & thus won’t
face trade discrimination.
MULTIPLE
SPEED EU
An informal practice in the EU
which allows nations to
voluntarily adopt various EU
regulations & programs when
the nation is ready. In the
absence of a strong EU
government & constitution, this
practice encourages member
nations to eventually “fall in
line” with early adopters.
NAFTA
• Free trade agreement
(begun in the early 1990s)
between Canada, Mexico, &
the USA
• NAFTA has economically
affected Mexico much more
than Canada or the USA,
whose economies dwarf
Mexico’s.
NAFTA has stimulated trade
between all 3 nations; hurt
smaller companies in
Mexico; hurt Mexican
agriculture (due to U.S.
farm subsidies); & caused
some “creative job
destruction” in the USA.
NATIONAL
INDUSTRIAL
PLANNING
Japan’s pioneering form of
Asian mixed capitalism in
which the Ministry of
Economy, Trade and Industry
(METI) brokers a nationalistic
partnership between
government & Japanese
corporations. Asian
corporations favor national
interests > investor interests.
NATURAL
RESOURCE
INSTABILITY
New red bulls
on the loose:
China, India,
Russia
• Lack of a global natural
resource conservation &
rationalization system
• Prospects of natural
resource wars & militarybacked colonialism
(especially in the Middle
East)
NEOCOLONIALISM
Westernizing the
economic & political
polices of developing
nations through the
imposition of neo-liberal
capitalism by global
government
organizations
Culture
conversion of
community
cultures to
individualism
NEO-LIBERAL
CAPITALISM
•Single purpose
business: maximize
profits
•Single corporate
stakeholder: financial
owners of the
company
• “Laissez faire” (leave
business alone) government
• Free trade (no protectionism)
• Social Darwinism survival of
the strongest corporations
only
• Minimum government;
maximum catering to
business
NET EXPORTING
NATIONAL
STRATEGY
IN ASIA
Using a mixed
capitalism
partnership between
business &
government to
maximize national
economic success
•Consistent trade
surpluses
•Government policies
to limit social welfare
benefits & importing
(negative trade
balance)
Using trade
surpluses to
finance Western
nations with
federal budget
deficits
NONGOVERNMENTAL
ORGANIZATIONS
(NGOS)
Global social activist
organizations that
champion
environmentalism,
human rights, &
peace
• Sierra Club
• Greenpeace
• Public Citizen
• Human Rights Watch
• Peacenet
• One World
• 25,000 others
NGOs oppose neo-liberal
capitalism; mass market
consumerism; transnational corporations;
global business
corruption; & the
International Monetary
Fund.
NON-PATRIOTIC
CORPORATIONS
•Foreign outsourcing
of both
manufacturing &
service sector
•Global supply
chains
OLIGARCHIES
(plutocracies)
• Nations (mostly in Latin
American & the Middle
East) with a social
structure dominated by a
small number of powerful,
rich elites who retard
economic development &
social change
•The need for more
democratic
institutions & middle
class
•Major cause of
political revolutions in
Latin America
OFF-SHORING
• Using cheap labor
around the world as a
substitute for expensive
domestic labor.
• Manufacturing & service
sector job exporting
Hollowing out the
blue collar
manufacturing
sector of Western
economies via
outsourcing
PRIVITIZATION
• Selling government owned
businesses (mixed
capitalism) to (often
foreign) private companies
• Common loan
requirements of
International Monetary
Fund & World Bank
• Main disadvantages: loss of
jobs in the privatized
company; economic
colonialism of foreign
companies
• Advantages: more efficient
& effective operations +
lowered government
budget
PROTECTIONISM
•Tariffs
•Subsidies
•Quotas
•Import substitution
•Tariff offset tax
breaks
•Violation of free
trade principle
•Ignites trade wars
•Infant industry
protection
RATIONALIZATION
OF GLOBAL
BUSINESS
Maximizing corporate
profits & minimizing
corporate costs
using the entire
world as an
operating arena
Tactics of global
rationalization:
• Manufacturing offshoring
• Global supply chains
• Social off-shoring
• Corporate surfing
RISK SHIFT
IN GLOBAL
BUSINESS
• Contracts
• Mainstream currencies
• Financial brokers
(such as factors)
• Friend-to-friend
networking
• Industry oligopolies
• Value-add chain
control
• Bribery
• Business lobbying &
political campaign
funding
SOCIAL
DARWINISM
Darwin’s survival
of the fittest law
of the jungle
applied to
business
Business Social Darwinists favor:
• Corporations >
governments
• Transnational (large)
corporations > domestic
• Free trade
• Libertarian (no government)
political ideology
The “uneven playing field”
of global business
contributes to Social
Darwinism:
• Protectionism
• Mixed capitalism
• Business corruption
• Neo-colonialism
SOCIAL
OFF-SHORING
Exporting illegal corporate
externalities to nations where
they are tolerated or laws
unenforced:
• Pollution
• Sweat shops
• Bribing government officials
• Unsafe products or deceptive
marketing
SOLDIER OF
FORTUNE
CORPORATIONS
•Global resource
rationing
•Non-patriotic, noncommunity
• Joint ventures with
foreign companies
SPIDER
WEB
STRATEGY
Win-win mercantilism-setting up a mutually
beneficial interdependent
trading system between
nations:
• Foreign outsourcing
• Technology sharing
• Government deficit financing
(Keynesian economics)
Pioneered by Japan in the
th
second half of the 20
century & followed by China
& other Asian nations.
Nations that need each other
economically don’t have to
like each other, but they do
have to cooperate politically.
For the most part, Western
nations use Asia for highly
profitable manufacturing
(cheap, plentiful labor) &
borrow large sums of Asian
money to finance Western
government deficits. Asia
receives numerous blue-collar
jobs & creditor status with the
West.
STAKEHOLDERS
Individuals &
organizations directly
affected by corporate
profit-seeking activities:
stockholders; employees;
customers; suppliers;
financers; governments
at all levels
Dueling
philosophies:
private
stakeholders only
vs. community
stakeholders
SUBSIDIES
Government payments to
agriculture &
sometimes high tech
businesses to help them
compete. A form of
mixed capitalism & a
violation of fair trade
The leading cause
of trade conflict
between the
West & the
developing world
SUSTAINABLE
INCOME
• The amount of wages needed
by global workers to meet the
basic physical needs of their
extended families.
• Because most corporations
serve only financial
stakeholders, sustainable
incomes are not guaranteed
throughout the world.
“Fair” trade practices
community capitalism by
paying workers in
agricultural coops a
sustaining wage “premium”
above & beyond what the
impersonal marketplace
provides them.
“SWEATSHOPS”
Low wage manual
labor factories used
primarily by offshoring companies
in developing
nations
Some capitalists justify
sweatshops on the
grounds that they are a
fleeting phase of a
nation’s economic
development & are
better than no jobs at
all.
“SWEETHEART”
BANK LOANS
A form of mixed capitalism
used by many Asian
nations to encourage
banks to make risky loans
to corporations, in return
for the guarantee that the
government will pay off
the corporation’s loan if
necessary.
SYSTEMS
EXPLOITATION
• Institutions create
impersonal systems that
are exploited for both
good & bad: commercial
markets, stock markets,
global trade, educational
systems, corporations,
political offices, etc.
• Nations, organizations,
and individuals play
the “gain game” by
exploiting these
systems for
nationalistic & personal
gain.
Capitalism is the world’s
largest, most exploited,
system for both good &
bad because of its
accessibility and
unparalleled financial
wealth.
• Global business exploits
capitalism to a greater
degree than any other
system on earth.
• Professional success
hinges on the capacity
to exploit corporate
systems for career gain.
TARIFFS
Taxes exporters
must pay to sell
their products in
foreign nations
Tariffs are a form of
protectionism (violation
of free trade) used to
give a nation’s
companies a
competitive advantage
over foreign exporters.
TRADE
AGENDAS
Godzilla nations
•Intellectual property
protection
•Trade of services
•Import substitution
•Neo-colonialism
Tiger nations
•Tariff protection
•Protection from
“hot money”
economic
meltdowns
Zebra nations
• Elimination of Godzilla
agricultural subsidies
• Elimination of import
substitution & forced
privatization
• Infant industry
protection
TRADE
DUMPING
Outlawed by the World
Trade Organization,
dumping occurs when a
nation sells its exports
below actual cost in a
foreign nation to quickly
grab significant market
share or to put local
competitors out of business.
TRANSNATIONAL
CORPORATIONS
Mega-large & powerful
corporations (financially
richer than most nations)
that rationalize their global
operations via maximum
presence in global markets.
They view the entire planet
as their operating arena.
TURBO
CAPITALISM
• Max political catering
to business &
corporations in
domestic & foreign
policy
• Politically popular since
“Reagonomics” in the
1980s
• Maximum business deregulation
(chain reaction ethics scandals in
1990s & 2000s)
• Corporate political campaign
contributions & lobbying
(unprecedented political influence of
corporations & industries)
• Appointment of former industry
executives to oversee business
regulatory agencies (abandonment
of agency principle)
• Corporate tax
minimization (increased
middle class tax burden)
• Keynesian economics:
stimulating business
with federal deficits
(mixed capitalism)
TWO-EDGED
SWORD OF
GLOBAL
BUSINESS
Capitalist gains made at
the expense of nonownership
stakeholders:
employees, local
communities, the
environment,
economies
• Off-shoring
• Social off-shoring
• Political campaign
contributions & lobbying
• Short-term
unemployment
The fiscal debt failure of
“Reaganomics” in the 1980s
and 2000s (under George W.
Bush) to reduce dependence
on government led American
leaders to increase
dependence on neo-liberal
capitalism for future
economic growth.
Corporations became the new
champions of public policy.
This emergent libertarian
capitalism has raised 3 new
challenges in its emphasis on
laissez-faire government,
new rounds of business
deregulation, and escalation
of Social Darwinism:
1. Will expanded business
deregulation unleash new
systemic corruption such as
in the energy industry in the
1990s (Enron-led financial
fraud) and the finance
industry in the 2000s
(especially the catastrophic
mortgage debacle)?
2. Will the probable future
decreases in government
social welfare programs (the
byproduct of abandoning
Keynesian financial
stimulation) neutralize the
anticipated gains of
libertarian corporate
economic stimulus?
3. Will the possible
escalation of crime and
social problems stemming
from truncated
government social welfare
programs diminish the
economic stimulus of
consumerism?
VALUEADDED
CHAIN
How revenue is
divided between
the various
contributors to a
finished product
The marketing activities of
most products (branding,
advertising, identitycreating) generally capture a
much larger share of sales
revenue than companies
involved in providing
material or human resources
for the product.
Industry value-added chains
are typically dominated by
companies with the biggest
clout (such as Wal-Mart in
general merchandise
retailing). Value chain
leaders play a major role in
determining product prices &
worker wages globally.
VIRTUAL
NATIONS
•Economic
interdependencies
•Free trade
agreements
•Global supply
chains
WORLD TRADE
ORGANIZATION
(WTO)
•Promotes &
regulates trade &
settles trade
disputes
•Headquartered in
Geneva, Switzerland
•Stalemate between
rich & poor nation
trade agendas
•The WTO perpetuates
neo-liberal capitalism
& hence neocolonialism